Disclaimers Result in IRA Passing to Decedent’s Estate of which Surviving Spouse is Sole Beneficiary; IRS Permits Spousal Rollover instead of Requiring Inherited IRA Treatment

The Decedent died at an age greater than 70.5 owning an IRA.  The 100% beneficiary of the IRA was a Trust.  The Decedent did not name a contingent beneficiary.  The Trust executed a qualified disclaimer of the IRA.  Each of the Decedent’s descendants also executed qualified disclaimers of the IRA.  As a result of these qualified disclaimers, the IRA passed to the Decedent’s estate to be governed by the Decedent’s Will under which the Decedent’s spouse was the sole beneficiary.

In PLR 201901005, the IRS ruled that for purposes of Code § 408(d)(3), the Decedent’s spouse will be treated as having acquired the IRA DIRECTLY FROM THE DECEDENT, and not from the Decedent’s estate.  Further, the Decedent’s spouse is eligible to roll over the Decedent’s IRA into such spouse’s own IRA.

Keep this ruling in mind for post-death planning of retirement benefits when the surviving spouse is not named as the IRA beneficiary.